Single Family Housing (SFH) has the potential to be the biggest real estate asset class. This was one of the predictions made at Bisnow's Single Family Housing Conference in late February. Gemma Leonard, Head of Development in DAC Beachcroft's Real Estate team, who facilitated one of the Conference sessions, shares other key factors which have been behind a surge of institutional capital into this type of residential development.
Early players were those focused specifically in SFH; now investors – both national and international - with larger and more diverse portfolios are active. Savills 2024 report into SFH anticipates £17bn of investment over the next five years. The North West has seen the most SFH development, with interest growing in the West Midlands and the East of the country as areas ripe for the next phases of growth.
While rental growth is not expected to be especially dramatic, investors like the consistent flow of income from a diverse tenant pool. Tenancies are longer, typically 4.5 years as compared to 1.3 in multi-tenant build to rent. Development is not subject to the delay over the fire safety concerns affecting multi-tenant, multi-rise and operational management is easier, particularly when scale can be achieved.
The larger housebuilders are certainly playing a role as developers, but some have yet to commit to the concept of SFH. Baking SFH into land value will be a signal that the larger player see the model as sustainable for them. In the meantime there is plenty of opportunity for partnerships and for the medium sized developers.
There is a clear segue from multi-tenant to SFH, with the younger profile of multi-tenant buildings, evolving to occupy SFH. Proximity of good schools is an important driver for choice of location by both provider and occupier, but SFH is not necessarily dominated by families. 60% of tenants do not have children; their focus is more on ease of access to work from nearby transport hubs and green spaces. Investors and developers alike are keen to support initiatives that support the evolution of a dynamic neighbourhood. The use of technology is attractive to tenants and is being embedded into single developments. However application across the area to inform investment and development decisions is hampered by lack of a data infrastructure.
Urbanisation, digitisation, the cost of ownership and shifts in demographics are all underlying factors in the growth of renting as an active choice. The longer length of tenancy and the professionalisation of management are though key to the increasingly popularity of tenants' selection of SFH, as they seek greater the greater security of somewhere they can call home and an opportunity to put down roots into a community. SFH is an important and expanding option in the drive to solve the UK's housing shortage.
